Cut the Sales Tax? Sure! Tax Income? 'No Way!'

By NICK RAVO, Special to The New York Times

Published: February 15, 1991

STAMFORD, Conn., Feb. 14—
Lydia Maffei looked a little queasy today when she learned that Gov. Lowell P. Weicker Jr. had proposed a new tax, a 6 percent state income tax, the night before.

Her appearance brightened, though, when she was told that Mr. Weicker had also proposed a cut in the state sales tax, to 4.25 percent from 8 percent.

"That part doesn't sound so bad," said Mrs. Maffei, the manager of Mondi, a women's clothing boutique in the Stamford Town Center mall. "It would be definitely good for business."

Ms. Maffei's mixed reaction to Mr. Weicker's proposed overhaul of Connecticut's tax system was typical of many people interviewed today.

Many business leaders hailed the Governor's plan to cut the sales tax, now the highest in the nation. They applauded his move to reduce the corporate income tax to 11.5 percent, from 13.8 percent, by Jan. 1. And they praised his proposal to abolish a tax on capital gains, interest and dividends by making them part of a taxpayer's gross income.

But the Governor's proposal for a state income tax, long politically taboo in Connecticut, aroused anger.

"No way!" said Ruta E. Lorenzo of Greenwich. "One of the pluses of Connecticut has been that it didn't have an income tax. Now everyone will move to the Sun Belt. Look at Florida. I is booming, and it doesn't have an income tax."

The Governor's plan, part of his $7.4 billion budget for the fiscal year starting July 1, would help close a $2.4 billion budget gap. The budget also includes $1.1 billion in spending cuts.

But mayors and local officials expressed fear that the spending cuts would leave them with too little state aid, and that that could lead to property-tax increases. 'Unfair,' Mayor Says

Stamford, for example, would receive $8.8 million in school aid and other state grants in the 1991-92 fiscal year, compared with $13.9 million for the current fiscal year. Norwalk would receive $9.4 million, compared with $15.8 million this year.

The Mayor of Norwalk, Frank J. Esposito, a Republican, said Mr. Weicker's reduction in aid to many towns and cities would simply shift the tax burden to property owners. "It is unfair," the Mayor said. "Thank God it is only a proposal to the General Assembly."

He said Mr. Weicker's plan would cut aid to the wealthiest towns without taking into account that some small cities have both wealthy suburbs and poor urban areas. Mayor Esposito also criticized the plan for measuring a town's affluence only by its total property value. This can be artificially inflated by the property values in bordering wealthy towns, he said. Norwalk's property values, for example, are increased by virtue of the city's proximity to Westport, Darien and New Canaan, all wealthy suburbs, he said. Worried About Cost-Shifting

Some business leaders were also concerned that property taxes would go up. "We want to make sure that there isn't any cost-shifting that may lead to higher local property taxes, which businesses also pay," said Christopher P. Bruhl, president of the Southwestern Area Commerce and Industry Association, which is based in Stamford.

Mr. Bruhl added that for Mr. Weicker's budget to win the support of businesses, strict constitutional controls on spending must be instituted.

"The willingness to discuss an income-tax proposal doesn't mean that you have accepted it," he said.

The executive vice president of the Connecticut Business and Industry Association, John R. Rathgeber, also supported the proposals to cut spending and business-related taxes, but he was wary about a personal income tax.

"The General Assembly must concentrate on state spending reform and the creation of a constitutional limit on future spending before turning its attention to any tax package," he said. Worried About Increases

Such expressions of caution were common in interviews with residents. Some seemed concerned that an income tax would only be increased in the future, or that the sales tax might go up again, having seen both happen in other states. Some people also said they were annoyed that they were being asked to keep state spending at a level created by a decade of double-digit spending increases.

They seemed to favor deeper spending cuts than those proposed by Mr. Weicker. Among other measures, the Governor wants to eliminate 1,855 of 45,800 state jobs, possibly 1,100 of them through layoffs, and close 7 of 19 motor vehicle offices, a training school for the mentally retarded in Mansfield and off-track betting parlors in Derby, New London, Norwich and Waterbury.

"The trouble with Connecticut is spending, not taxes," said John S. Traynor, a bank portfolio manager who works in Stamford and lives in Ansonia.

A colleague of his, Michael C. Nowlin of Fairfield, was equally troubled by the prospect of an income tax. "I figured my taxes would go up from a couple of hundred dollars a year to a couple of thousand," he said. "I'm angry about it."

Photos: "The trouble with Connecticut is spending, not taxes," said John S. Traynor, left, a bank portfolio manager in Stamford. With him yesterday at the Stamford Town Center mall was Michael C. Nowlin, a colleague.; Lydia Maffei, who manages a clothing store in the mall, has mixed feelings about Gov. Lowell P. Weicker Jr.'s tax proposals. (Photographs by Joyce Dopkeen/The New York Times)